Identify the Red Flags and React Before Crisis Hits

Whether your year-end is 31 December or 31 March, by now you’ll have been deep in the financial numbers. Was it plain sailing — or did you look the other way when the first red flags started to appear? Were there more surprises than you expected?

With the AI bubble potentially nearing a correction and international instability at historic highs, leaders need to be brutally honest about the health of their business. Are there red flags that you should no longer be ignoring — and how do you take back control before it’s too late?

I recently published The Crisis Playbook — A Practical Survival Guide to Successful Business Turnaround — and in this I make one point very clear:

𝙒𝙝𝙚𝙣 𝙪𝙣𝙙𝙚𝙧𝙥𝙚𝙧𝙛𝙤𝙧𝙢𝙖𝙣𝙘𝙚 𝙞𝙨 𝙡𝙚𝙛𝙩 𝙪𝙣𝙘𝙝𝙚𝙘𝙠𝙚𝙙, 𝙞𝙩 𝙙𝙤𝙚𝙨𝙣’𝙩 𝙨𝙩𝙖𝙗𝙞𝙡𝙞𝙨𝙚 — 𝙞𝙩 𝙚𝙨𝙘𝙖𝙡𝙖𝙩𝙚𝙨 𝙞𝙣𝙩𝙤 𝙙𝙞𝙨𝙩𝙧𝙚𝙨𝙨.

This is the moment when options begin to narrow and external intervention can become unavoidable.

What Are the Early Symptoms of Underperformance?

These are the first whispers that your business is starting to struggle. Ignore them and they often turn into a roar.

Market share is under pressure: Competitors are eating into your position, and your pipeline isn’t as strong as it used to be.

Turnover and profits are losing stability: Volatility creeps in, and the prospect of losses becomes very real.

Increased lender attention: Banks and investors are checking in more often, referencing covenants or hinting at security reviews.

At this stage, recovery is most achievable, and you have the most options available. But it requires clear thinking, honest assessment, and timely decisions even when those decisions feel premature or overly cautious.

This is precisely when bringing in experienced advisors pays for itself—they can help you distinguish between temporary blips and genuine warning signs, and guide you toward actions that preserve rather than erode your options.

And the First Signs of Distress?

When underperformance is left unchecked, it escalates into distress. This is where options start to shrink, and external intervention may become necessary.

🚩Borrowings are increasing

This can show up in several ways.

 - Overdrafts used as a permanent funding solution rather than for short-term peaks and troughs

 - Leasing or hire purchase of assets that were previously bought outright

 - Stretching creditor payments to preserve cash

 - Exploring invoice financing or debtor-based lending to free up working capital

🚩Losses are growing

What were once manageable dips are now widening gaps.

🚩Credit rating and reputation taking a hit

Suppliers, lenders, and even customers begin to sense the instability.

🚩 Rising staff turnover

 Key people leave as uncertainty increases and morale declines.

Ask for help

The cost of professional guidance at this stage is still typically a fraction of what you'll lose if the situation deteriorates further— and the credibility that comes with having respected advisors involved often makes the difference in maintaining lender and stakeholder support.

Other warnings many underestimate?

🚩 Qualified audit reports

 When auditors qualify their opinion due to going concern doubts, this is not a yellow flag — it’s a red alert. External professionals are effectively stating they have substantial doubt about the business’s ability to survive.

🚩 Frequent lender meetings

Banks and lenders start to press more aggressively for future forecasts, financial updates, and personal guarantees. When your financial partners become more cautious, it’s a clear sign you need to act.

These signs of distress are dangerous precisely because they feel survivable. But this is where control quietly slips away — unless decisive action is taken early. The businesses that recover are the ones that confront reality sooner, not later.

In Crisis, Where it All Hits at Once

This is where cash is tight to the point of scarcity, credit lines are maxed out, and lenders have stopped extending help. Creditors start demanding payments to be brought up to date, paid in full— or worse—they threaten legal action.

Statutory payments like PAYE and VAT fall into arrears. Legal pressure ramps up—bailiffs knocking, winding-up petitions filed, landlords threatening eviction. At this stage, you’re on the brink of failure or insolvency.

Time to Take a Health Check?

Assess your business regularly against the warning signals we’ve discussed.

• Seek external advice early—accountants specialising in business recovery or experienced non-executive directors can offer invaluable perspective.

• Use commercial credit agencies to monitor your credit position. 

• Regularly perform business health checks (see below) — done routinely they provide crucial insights.

• Be proactive, honest, and clear-headed about where you stand can make all the difference between weathering the storm and being overwhelmed by it.

The Crisis Playbook Self Assessment

No one likes to start the week on a downer — but ignoring red flags is how manageable issues can turn into full-blown crises.

At Fortitude London, we encourage leadership teams to pause and take stock, but more importantly, to be brutally honest about what they see. That’s why I designed The Crisis Severity Checklist. It’s a practical self-assessment tool that helps you spot early warning signs, cut through noise and wishful thinking, and understand the true scale of the challenge you’re facing, before it escalates.

Accepting where you are gives you the chance to start being proactive and The Crisis Playbook offers practical guidance to help you face this challenges head-on, to start the transformation from crisis into comeback.

Access the full ebook here. The Crisis Severity Checklist is from p47 and please do get in touch if I can be of assistance — whether that is to do a deeper Health Check or work with you on Turnaround strategies.

simon.jones@fortitudelondon.com